Investors are more interested in managing money to hit certain goals – such as having enough to live on in retirement – in a way that reduces unprofitable risks rather than just aiming for the highest possible gains.

Investors are more interested in managing money to hit certain goals – such as having enough to live on in retirement – in a way that reduces unprofitable risks rather than just aiming for the highest possible gains, a survey finds.

CREATE-Research, in a study commissioned by Principal Global Investors, says its findings reveal a major change in how investors, including high net worth individuals, think about money, driven by continued uncertainties and a low-interest rate environment.

High net worth investors, for example, have moved away from a blanket focus on alpha to an emphasis on risk mitigation. They have become particularly cautious in developed markets and especially demanding in emerging markets in order to manage unrewarded risk. A preference for active management remains, the report said.

“The financial crisis taught investors a number of lessons, but a key takeaway for all was greater caution. Investors have become more risk-aware and more agile than ever before. In 2013, the quest for yield was evident. In 2014, as caution has become more embedded in the investor psyche, investors have recalibrated their return expectations,” Andrea Muller, chief executive of Principal
Global Advisors Asia, said in a statement on the report.

“While the debate around active versus passive has been resurgent, the real focus of the industry should be on adapting investment solutions to the new goal-oriented and risk-adverse mind-set of investors worldwide. Customisation is the name of the game,” Muller said.

All investor groups tracked – retail investors, HNW clients; defined contribution and defined benefit pension investors, demonstrated broadly the same shift towards a more goal-orientated approach, away from high-Alpha.

Professor Amin Rajan, CEO of CREATE-Research, said: “While the investment environment remains challenging, investors want two things: low-cost options to meet their perceived needs and assets that can deliver specific goals. The latter includes capital growth, regular income, inflation protection and capital conservation. This is the age of goal-oriented investing.”

Among the trends noted between 2012 and 2014 were that, among HNW investors, property has become notably popular, showing an increase of nearly 25 per cent in investor interest, from 37 per cent in 2012 to 61 per cent in 2014. Investors continue to prefer active management with an increase of 25 per cent, from 29 per cent in 2012 to 54 per cent in 2014.

Among retail investors, funds with an income focus have become the most popular choice over the last two years with an increase in investor interest of 14 per cent, from 48 per cent in 2012 to 62 per cent in 2014.